Time Commitments for Independent Board Directors

The primary role of a board of directors is to create and maintain the company’s strategy. Many of the duties and responsibilities expected of board members involve work performed in various committees such as auditing, compensation, reviewing CEO performance, nomination and governance. A single board can have a number of committees, each dedicated to one of these areas, that require significant time commitment from the members involved.

Research shows that “directors on average spend over 200 hours on board related matters” per year. This is equivalent to one full month of workdays being spent on board responsibilities. “Thus, the extra responsibilities accrued with a board appointment must be carefully weighed against [an individual’s] workload and personal obligations”.

The board reports the performance of the corporation to the investors, including areas of governance such as fiscal accountability, material events and any policies that may have been enacted. Thus, boards generally strive to manage their resources efficiently and effectively to correctly represent their company and its goals and to ensure that every decision made is in the best interest of their stockholders.

In the past, boards have traditionally convened at four half-day meetings per year, each requiring only an hour’s worth of preparation, for a total time commitment of fewer than twenty hours per year. Now, boards can convene at up to eight meetings per year, with added committee meetings, management presentations, strategy sessions and multiple hours of preparation for each meeting, totaling to over 200 hours per year. This time commitment can even double in times of company crisis.

Directors generally prepare for board meetings ahead of time, allowing for active and insightful participation during meetings. Typically, three hours of preparation are spent for every hour of actual board meeting time. This may include reviewing financial documents and annual reports, performing industry and competitor research, consulting with colleagues and other committee members and reviewing relevant newspapers and industry journals.

The distinction between higher and lower impact boards rests upon the amount of issues taken on and the time dedicated to them. On average, directors of greater impact boards report spending on average forty days per year working for their board, whereas directors of lower impact boards only report spending twenty to thirty days per year. Moreover, less effective directors report that they would ideally work five days more and more effective directors feel that their time commitment is sufficient. 

This time is spent on meetings concerning the ongoing creation and monitoring of strategy, the identification of new opportunities, and risk management. As maintaining strategy becomes increasingly crucial, higher impact board members report investing an additional eight workdays per year solely on strategy. As a result of the importance of the board in a company’s reputation and function, companies must assess the commitment that is expected of directors and align those expectations as a part of their recruitment process.

 

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